Historically, in a typical credit card transaction, the process begins with a credit card holder providing his credit card to an attendant located at a point-of-sale device (e.g., cash register) within a merchant setting. In response, the attendant typically “swipes,” “dips,” or “waves” the card depending on the card reader that is coupled to the point-of-sale device. Thus, cardholder information (including the name of the cardholder and the credit card number) is transferred from the storage medium on the card to the point-of-sale device.
Traditional card payments via merchant Point of Sale terminals are an accepted mode of transferring value. These are generally considered to be secure by the payment processors. Also, traditional card payments via merchant Point of Sale terminals enable a merchant to shift some liability for the transaction to the transaction processor. Other payment methods (outside of a user physically interacting with a point of sale system) change the paradigm from an authorization, fraud and/or security standpoint. Oftentimes, higher premiums are leveraged on merchants accepting payments through these non-traditional payment methods as there is a higher risk associated with the transaction from the account issuer point of view.
It would be beneficial to have a system where non-traditional payment systems and methods may be employed and still maintain a low fraud risk associated with the transaction.